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HomeMy WebLinkAbout872 FoustSTATE ETHICS COMMISSION 308 FINANCE BUILDING HARRISBURG, PENNSYLVANIA 17120 In re: Robert H. Foust : File Docket: 92- 003 -C2 : Date Decided: December 10, 1992 : Date Mailed: December 15, 1992 Before: James M. Howley, Chair Daneen E. Reese, Vice Chair Roy W. Wilt Austin M. Lee Allan M. Kluger The State Ethics Commission received complaints regarding possible violations of the State Ethics Law, Act No. 170 of 1978 and Act No. 9 of 1989. Written notice, of the specific allegation(s) was served at the commencement of the investigation. A Findings Report was issued and served, upon completion of the investigation, which constituted the Complaint by the Investigation Division. An Answer was filed and a hearing was waived. A Consent Order was submitted by the parties to the Commission for consideration which was subsequently approved. This adjudication of the Commission is hereby issued which sets forth the individual Allegations, Findings of Fact, Discussion, Conclusions of Law and Order. This adjudication is final and will be made available as a public document fifteen days after issuance. However, reconsideration may be requested which will defer public release of this adjudication pending action on the request by the Commission. A request for reconsideration, however, does not affect the finality of this adjudication. A reconsideration request must be received at this Commission within fifteen days of issuance and must include a detailed explanation of the reasons as to why reconsideration should be granted in conformity with 51 Pa. Code §2.38. The files in this case will remain confidential in accordance with Section 8(a) of Act 170 of 1978 and Act 9 of 1989, 65 P.S. §408(h), during the fifteen day period and no one unless the right to challenge this Order is waived, may violate confidentiality by releasing, discussing or circulating this Order. However, confidentiality does not preclude discussing this case with an attorney at law. Any person who violates confidentiality of the Ethics Act is guilty of a misdemeanor subject to a fine of not more than $1,000 or imprisonment for not more than one year, 65 P.S. S409(e). Foust, 92- 003 -C2 Page 2 I. ALLEGATION: The Pennsylvania State Ethics Commission has reviewed the allegation(s) that Robert H. Foust, a Councilman for Watsontown Borough, Northumberland County, violated the following provisions of the State Ethics Act (Act 170 of 1978), when he contracted with the Borough for the sale of insurance, including but not limited to, workers compensation, police liability and bonds for public officials, without an open and public process, and when he voted to pay the premiums: Section 3. Restricted Activities. (a) No public official or public employee shall use his public office or any confidential information received through his holding public office to obtain financial gain other than compensation provided by law for himself, a member of . his immediate family, or a business with which he is associated. 65 P.S. §403(a). (c) No public official or public employee or a member of his immediate family or any business in which the person or a member of the person's immediate family is a director, officer, owner or holder of stock exceeding 5% of the equity at fair ; market value of. the business shall enter into any contract valued at $500 or more with a governmental body unless the contract has been awarded through an open and public "process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. Any contract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of making of the contract. 65 P.S. §403(c). And, that Robert H. Foust violated the following Sections of the State Ethics Act (Act 9 of 1989). Section 3(a) of Act 9 of 1989 provides: Section 3. Restricted Activities (a) No public official or public employee shall engage in conduct that constitutes a conflict of interest. 65 P.S. §403(a). Foust,, 92- 003 -C2 Page 3 (f) No public official or public employee or his spouse or child or any business in which the person or his spouse or child is associated shall enter into any contract valued at $500 or more with the governmental body with which the public official or public employee is associated or any subcontract valued at $500 or more with any person who has been awarded a contract with the governmental body with which the public official or public employee is associated, unless the contract has been awarded through an open and public process, including prior public notice and subsequent public disclosure of all proposals considered and contracts awarded. In such a case, the public official or public employee shall not have any supervisory or overall responsibility for the implementation or administration of the contract. Any contract or subcontract made in violation of this subsection shall be voidable by a court of competent jurisdiction if the suit is commenced within 90 days of the making of the contract or subcontract. 65 P.S. §403(f). II. FINDINGS: 1, Robert Foust served as Watsontown Borough Councilman from January 1988 to April 1992. a. He served as Council President during 1990 and 1991. 2. The Foust Agency, Watsontown, Pennsylvania, is a firm which has provided insurance services to the Borough since the 1970s. a. Robert Foust's father founded this business. b. Foust purchased the firm from his father and has owned and operated it since January 1980. 3. The Foust Agency has entered into contracts within Watsontown Borough for the sale of various types of insurance since at least 1980. a. The types of insurance included Workers Compensation, Police Professional Liability and bonds for borough manager and treasurer. b. These contracts were in effect prior to Robert Foust's Foust, 92- 003 -C2 Page 4 service as a borough councilman. 4. Watsontown Borough has made payments to the Foust Agency as follows, for insurance services since Robert Foust began service as a borough councilman. a) Check No. Date 1379 3/07/88 b) 1408 3 \07 \88 c) 1462 4 \04 \88 d) 1492 5/02/88 e) 1796 10/04/88 f) 1957 12/29/88 g) 2066 2/08/89 h) 2437 8/07/89 i) 2560 10/02/89 j) 2742 12/17/89 k) 2819 2/05/90 * Robert Reason Workers' Comp. payments for Jan., Feb., March 1988 Police Professional Liability Insurance Fourth Monthly Payment for Workers' Comp. Insurance Final Installment, Workers'Comp. Insurance Township Manager's Bond Bond for Borough Assistant Treasurer Police Professional Liability Insurance Bond for Borough Manager Bond for Borough Assistant Treasurer Bond for Secretary/ Treasurer Police Liability Insurance Foust was . -co- signer of this check as Council 1) 3386 10/08/90 Bond for Borough Assistant Treasurer Amount $ 9,273.00 7,753.00 2,819.00 3,174.00 175.00 269.00 8,165.00 175.00 269.00 355.00 8,165.00 President. 269.00 * Robert Foust was co- signer of this check as Council President. Fo 92- 003 -C2 Page 5 m) 3528 12/05/90 Bond for Secretary/ Treasurer 355.00 * Robert Foust was President. 214 3/04/91 * Robert Foust was President. o) 565 8/07/91 p) 704 10/09/91 * Robert Foust was President. co- signer of this check as Council Police Professional Liability 8,464.00 co- signer of this check as Council Borough Manager's Bond 175.00 Bond for Borough Assistant Treasurer 269.00 co- signer of this check as Council Total $50,124.00 5. The payments outlined in 4 (a through p) were made on policies and bonds that were entered into and contracted by the borough prior to Foust's election to borough council. 6. Minutes of Watsontown Borough Council meetings confirm that Robert Foust voted in favor of motions to pay bills of the borough at regularly scheduled meetings. a. The motions were in the form to pay all bills listed which would include premium statements from the Foust Agency (see Finding 4 (a through p)) among other bills. b. Foust routinely voted to pay all bills. c. Motions to pay bills were carried unanimously. 7. The Foust Agency would receive commissions of approximately 10% for the sale of insurance to the borough. 8. The Borough purchased insurance as a yearly package. a. This package included coverages for Property, Inland Marine, General Liability, Automobile, Workers Compensation, Umbrella, Boiler and Machinery and Errors and Omissions insurance. b. Police professional liability insurance and bonds for Foust, 92- 003 -C2 Page 6 borough officials were not included in this package. c. The policy dates for the police professional liability insurance and the bonds came up during various months of the year. 9. Since 1990, the Borough has drawn up specifications for insurance contracts and advertised for bids. a. The specifications are advertised in the Milton Daily Standard newspaper. b. A public announcement of the insurance needed is made at a council meeting and posted at the borough building. 10. Designated Council members serve on an insurance committee during their tenure. a. The purpose of this committee is to assess insurance matters and then report to council. b. The insurance committee does not have the authority to award insurance contracts. c. The insurance committee makes recommendations to council with regard to insurance contracts. d. Council reviews input from the insurance committee before making decisions. 11. Robert Foust served as a member of the insurance committee. a. Because Foust's area of expertise was insurance, he was asked his opinion of the types of insurance that would best suit borough needs. 12. Worker's compensation insurance has been placed out for bid as part of the Borough's yearly package of insurance since 1989. a. During July of each year, bids are sought by the Borough on this package. 13. The Foust Agency provided workers' compensation insurance to the Borough from 1985 to July 1988. a. In July 1988, the Mallalieu Golder Agency was awarded the workers' compensation insurance as part of the quote process. 14. The Foust Agency has provided police professional liability insurance to the Borough since at least February 1981 to Foust, 92- 003 -C2 Page 7 February 1992. a. This insurance has a renewal date during February of each year. b. It was not included in the Borough's July package of insurance during the above years. 15. The Foust Agency has provided bonds for Borough officials since at least the early 1980s. a. The bonds come up for renewal at various times of the year. b. They have not been included in the package of insurance for bid during July of each year due to the various renewal dates. 16. Prior to assuming the position of borough councilman and concerned that serving on Borough council might conflict with his insurance business, Foust sought the legal advice of Borough Solicitor Allen Neyhard, Esquire regarding the Foust Agency's business relationship with Watsontown Borough. a. Borough Solicitor Neyhard advised Foust prior to Foust becoming a member of Borough Council, that the Borough's purchase of insurance, through the Foust Agency, would not constitute a conflict of interest, or violate the State Ethics Act. b. Even though present at Borough Council meetings, Borough Solicitor Neyhard, did not caution Foust not to vote nor advise Foust that he should abstain from voting to pay Foust Agency invoices. c. Foust relied upon the legal advice and counsel of Solicitor Neyhard regarding a possible conflict of interest. 17. On Statements of Financial Interests filed annually with the Borough, Foust reported the Foust Agency as a source of income and that he is President /Treasurer and owner of the Foust Agency. III. DISCUSSION: Initially, it is noted that the allegations in this case relate to both Act 9 of 1989 and Act 170 of 1978. In this regard, Section 9 of Act 9 of 1989, P.L. 26, provides, in part, as follows: "This amendatory act shall not apply to fauli., 92- 003 -C2 Page 8 violations committed prior to the effective date of this act, and causes of action initiated for such violations shall be governed by the prior law, which is continued in effect for that purpose as if this act were not in force. For the purposes of this section, a violation was committed prior to the effective date of this act if any elements of the violations occurred prior thereto. ". Under both Act 170 of 1978 and Act 9 of 1989, as a Councilman for Watsontown Borough, Robert H. Foust, hereinafter Foust, is a public official as that term is defined under both acts. See also 51 Pa. Code. As such, his conduct is subject to the provisions of both laws and the restrictions therein are applicable to him. Under Section 3(a) of . Act 9 of 1989 quoted above, a public official shall not engage in conduct that constitutes a conflict of interest. The term "conflict of interest" is defined under Act 9 of 1989 as follows: Section 2. Definitions. "Conflict or conflict of interest." Use by a public official or public employee of the authority of his office or employment or any confidential information received through his holding public office or employment for the private pecuniary benefit of himself, a member of his immediate family or -a business with which he or a member of his 'immediate family is associated. "Conflict" or "conflict of interest" does not include an action having a de minimis economic impact or which affects to the same degree a class consisting of the general public or a subclass consisting of an industry, occupation or other group which includes the public official or public employee, a member or his immediate family or a business with which he or a member of his immediate family is associated. 65 P.S. §402. Under Section 3(a), of Act 170 of 1978 quoted above, this Commission has determined that use of office by a public official to obtain a financial gain for himself or a member of his immediate family or a business with which he is associated which is not provided for in law transgresses the above provision of law. Thus, Foust, 92- 003 -C2 Page 9 use of office by a public official to obtain financial gain which is not authorized as part of his compensation is prohibited by Section 3(a): Hoak /McCutcheon v. State Ethics Commission, 77 Pa. Commw. Ct. 529, 466 A.2d 283 (1983); Yacobet v. State Ethics Commission, 109 Pa. Commw. Ct. 432 531 A.2d 536 (1987). Similarly, Section 3(a) of the Ethics Act would prohibit a public official/ employee from using public office to advance his own interests; Koslow v. State Ethics Commission, 116 Pa. Commw. Ct. 19, 540 A.2d 1374 (1988). Likewise, a public official /employee may not use the status or position of a public office for his own personal advantage; Huff, Opinion 84 -015. Section 3(c) of Act 170 of 1978 quoted above provides in part that no public official /public employee or a member of his immediate family may contract with his governmental body if the contract is five hundred dollars or more unless it is awarded through an open and public process including prior public notice and subsequent public disclosure. In addition, Section 3(f) of Act 9 of 1989 specifically provides in part that no public official /employee or spouse or child or business with which he or the spouse or child is associated may enter into a contract with his governmental body valued at five hundred dollars or more or any subcontract valued at five hundred dollars or more with any person who has been awarded a contract with the governmental body with which the public official /employee is associated unless the contract is awarded through an open and public process. In the instant matter we must determine whether Foust violated either Section 3(a) or 3(c) of Act 170 of 1978 or Section 3(a) or 3(f) of Act 9 of 1989 regarding the sale of various insurance policies by Foust Insurance Agency to Watsontown Borough. Factually, Foust served on Watsontown Borough Council from January, 1988 to April, 1992. In a private capacity, Foust is the owner of the Foust. Insurance Agency, a firm which provides insurance services. Although Foust Insurance Agency contracted with Watsontown Borough for the sale of various types of insurance or bonding since 1980, the contracting occurred prior to Foust serving as a Watsontown Borough Councilman. The Watsontown Borough Council meeting minutes reflect voting by Foust on motions to pay lists of bills of the Borough which included Foust Insurance Agency. The motions to pay such bills carried unanimously. The Foust Insurance Agency typically received a commission of approximately 10% for the sale of insurance to Watsontown Borough. The record also reflects that Foust co- signed checks as Council President to Foust Insurance Agency. Since 1990, the Borough has drawn up specifications and Foust, 92- 003 -C2 Page 10 advertised for bids as to insurance contracts. The Borough Council designates certain Council Members to serve on the insurance committee to assess insurance matters and report to Council at which time Council reviews the recommendations and makes the final decision. Foust was a member of the insurance committee because of his expertise in insurance. Foust was asked for his opinion on types of insurance that would best suit the Borough's needs. Foust contacted the Borough Solicitor prior to assuming his position on Council and inquired as to whether there would be any conflict regarding his insurance business. The Solicitor advised Foust that he would not have a conflict as to the Borough's purchase of insurance from his agency and, in addition, the Solicitor did not direct Foust to abstain as to voting to pay Foust Insurance Agency invoices. Lastly, Foust declared on his Statement of Financial Interests that Foust insurance Agency is a source of income and that he is president, treasurer and owner of that firm. In applying the provisions of Section 3(a) of Act 170 of 1978 and Act 9 of 1989 to the above facts, we find a technical violation of the Ethics Law. It is clear that the actions of Foust in co- signing checks or voting to approve lists of bills which included Foust Insurance Agency was a use of office under Act 170 and a use of authority of office under Act 9. In addition, such action by Foust as a public official resulted in a financial gain /private pecuniary benefit. Lastly, the gain or benefit was to the Foust Insurance Agency which is a business with which Foust is associated as that term is defined under Act 170 and Act 9. Said financial gain/ private pecuniary benefit was to Foust Insurance Agency and derivatively to Foust himself since the firm is owned by Foust. Finally, the financial gain is other than compensation provided for by law and the benefit is a private one since there is no provision under the Borough Code which authorizes such gain. However, since the voting by Foust was for lists of bills which included Foust Insurance Agency and since the motions passed unanimously, we will take no further action in this case as to this particular allegation given the totality of the facts and circumstances. Turning to the allegation that such action violated either Section 3(c) of Act 170 or Section 3(f) of Act 9, we find no violation of either of those provisions of the Ethics Law for the following reason. In all instances of these contracts, the record reflects that these contracts were entered into between Watsontown Borough and Foust Insurance Agency prior to the time that Foust became a member of Borough Council. Since Foust was not a Borough Councilman and hence not a public official at the time of the contracting, Sections 3(c) and 3(f) of Act 170 and Act 9 would not have application. Accordingly, for the foregoing reason, we find no violation as to this aspect of the allegation. Foust, 92- 003 -C2 Page 11 IV. CONCLUSIONS OF LAW: 1. Robert H. Foust as a Watsontown Borough Councilman was a public official subject to the provisions of Act 170 of 1978 and Act 9 of 1989. 2. A technical violation of Section 3(a) of Act 170 of 1978 and Section 3(a) of Act 9 of 1989 occurred when Foust voted in favor of motions to pay lists of bills which included Foust Insurance Agency, the business with which he was associated, and co- signed checks in payment of invoices of Foust Insurance Agency. 3. Foust did not violate Section 3(c) of Act 170 of 1978 or Section 3(f) of Act 9 of 1989 regarding contracting between Foust Insurance Agency, the business with which he was associated, and the Borough of Watsontown in that said contracting occurred prior to the time that Foust became a public official as a Watsontown Borough Councilman. In re: Robert H. Foust ORDER NO. 872 File Docket: 92- 003 -C2 Date Decided: December 10, 1992 Date Mailed: December 15, 1992 1. A technical violation of Section 3(a) of Act 170 of 1978 and Section 3(a) of Act 9 of 1989 occurred when Robert H. Foust, a Watsontown Borough Councilman, voted in favor of motions to pay lists of bills which included Foust Insurance Agency, the business with which he was associated, and co- signed checks in payment of invoices of Foust Insurance Agency. 2. Foust did not violate Section 3(c) of Act 170 of 1978 or Section 3(f) of Act 9 of 1989 regarding contracting between Foust Insurance Agency, the business with which he was associated, and the Borough of Watsontown in that said contracting occurred prior to the time that Foust became a public official as a Watsontown Borough Councilman. 3. Based upon the totality of the facts and circumstances in this case, the Commission will take no further action. BY THE COMMISSION, JAMES M. HOWLE